UK BAROMETER
Braving a new world
T
HE UK real estate market has endured its most turbulent year in living memory, reeling under the twin blows of the pandemic and Brexit. But while the broad picture has been bleak for real estate investors and operators, surprising pockets of resilience have emerged. The COVID-19 pandemic has left the UK with one of the highest per capita levels of infection and, sadly, deaths, in the developed world. However, through 2021 the rapid roll-out of a mass-vaccination programme allowed an early relaxation of restrictions, with shopping centres, workplaces and leisure destinations once again fully open by the summer. But all the indications are that the UK real estate sector will face a long road to recovery. For landlords, the biggest challenge has been the loss of rental income as tenants either went out of business or took advantage of a government-imposed moratorium on evictions to simply stop paying rent. “Nowhere else in the world has the property industry been subject to such punitive measures by a government,” says Melanie Leech, chief executive of the British Property Federation. “The billions of pounds looking to invest in UK real estate will be watching our government’s actions closely.”
The double whammy of Brexit and COVID-19 have certainly shaken the UK real estate market. But the first green shoots are starting to emerge, writes Graham Parker Nuveen Real Estate’s St James Quarter in Edinburgh, a shopping galleria anchored by John Lewis
Melanie Leech: “The billions of pounds looking to invest in UK real estate will be watching our government’s actions closely” The problem was particularly acute in the retail sector, with shopping centres locked down for long periods. British Land, for instance, was unable to collect 29% of the rents due on its retail assets in the year to March 2021. As a result, profits fell by 34% and the value of British Land’s retail portfolio fell by 25%. However, the problems are not restricted to retail — the office market faces challenges too, especially in central London where, according to Deloitte, supply is soaring at a time when leasing activity remains subdued. The firm’s annual Crane Survey shows more new office MIPIM ONE BOOK
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SEPTEMBER 2021
